Greetings investors.
Shares of Ivanhoe Mines (TSX:IVN) are in the tank after the company reported steepening losses from last year. The stock is in a firm downtrend after reaching its high of $18 Cdn per share last July, and now trades under $12 Cdn per share.
The real problem for Ivanhoe stock appears to be the lack of a definitive agreement with the Mongolian government over its Oyu Tolgoi copper project, despite all the mightly efforts from last year to close a deal. The matter is reportedly pending amendments to the country’s mineral laws which are now before its parliament.
Oyu Tolgoi has a projected mine life of 40 years and peak annual production of 1.6 billion pounds of copper. Virtually all of that is destined for China.
Typically, projects of this scale require substantially more lobbying efforts to get into production, and Oyu Tolgoi is no exception. However, I believe it will be permitted eventually and Ivanhoe stock will return to its highs. I just hope it happens during the current peak in copper and gold pricing.
It’s worth noting that mineral giant Rio Tinto PLC, which has a 9.95 per cent stake in Ivanhoe, is in China at this moment promoting good will and the need for infrastructure projects. My bet is they’re pushing the Chinese to built the transportation nexus needed to bring mineral production from Oyu Tolgoi in the east to markets in the west. I wouldn’t be surprised to see Rio Tinto involved in some of those capital projects, as a joint venture partner.
An announcement of that nature couldn’t help but assist Ivanhoe’s efforts to get the green light in Mongolia.
So watch for that!
Kb
The BarkerLetter on April 7th 2008 in Commodity investing
